The price of natural gas has risen alarmingly in recent days – and the reason for this is, among other things, the war between Israel and the radical Islamic Hamas. A megawatt hour of the relevant futures contract TTF cost almost 50 euros on Wednesday, an increase of around 40 percent within just three trading days. The abrupt price increase was the result of a series of bad news. On Tuesday it became known that Israel had ordered the US energy company Chevron to temporarily shut down a large gas field in the Mediterranean due to security concerns. The Tamar offshore platform is located in the sea only about 20 kilometers from the distant Gaza Strip.
“It’s not a very large gas field, but the closure had a primarily psychological impact on the gas price,” says Andreas Schröder from the analysis company ICIS. Shortly before, there had been reports of an abrupt drop in pressure in a gas pipeline between Finland and Estonia. On Wednesday, the Finnish government confirmed that this was caused by violence. The pipeline is expected to remain closed over the winter. The case is reminiscent of the attacks on the Nord Stream 1 and 2 gas pipelines over a year ago, which have still not been solved. It shows once again how vulnerable the gas supply is to violence and terror. This unsettles the market.
There was also news from Australia that workers at two large liquefied natural gas projects wanted to resume their strikes. Indirectly, this could also have a negative impact on European gas supplies if Asian suppliers – buyers of liquefied natural gas from Australia – increasingly have to look for alternatives.
Shortly before winter, negative news is particularly critical
“The series of negative news led to the strong price reaction,” says analyst Schröder. The situation had eased in the past few months. The filling level of German gas storage facilities is currently around 95 percent, a historic high. This is also a consequence of the panic that arose after the outbreak of the Ukraine war when Russia cut off gas supplies to Europe. Germany in particular was dependent on Russian natural gas. The government and the gas industry had to look for alternatives within a short period of time. At that time the price rose to 350 euros per megawatt hour.
The suppliers in Germany have learned from this and filled the warehouses. The gas price that fell again helped them. “Perhaps people have recently been lulled into a false sense of security,” says the expert. Because the price has fallen to a level that is almost too low in view of the global risks that still exist. The war in Israel has now added to these risks. “This shows everyone how tense the situation still is – and hence the strong price reaction.”
Analyst Schröder expects the gas price to remain at a high level for the time being, especially since sellers can trade natural gas more expensively in the cold season. There could also be strong price fluctuations in the next few weeks.
However, it is not yet possible to predict whether and how the recent increase in gas prices will affect end customers. According to market experts, many suppliers have not even passed on the price slide in recent months to their customers. Movements on the market always only show up on gas customers’ bills after a delay of a few months. “It is not possible to make a general statement on this because each supplier follows its own purchasing strategy and has its own billing periods,” says Schröder. But one thing is also clear: “Every price increase will reach the consumer sooner or later.”